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NOTES PAYABLE | 6 Months Ended
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Sep. 30, 2017
Debt Disclosure [Abstract] |
NOTES PAYABLE | ABLE Notes payable consisted of the following:
|  | September 30, 2017 |  | March 31, 2017
(In thousands) |  | Current Portion |  | Long Term Portion |  | Current Portion |  | Long Term Portion
Prospect Loan |  | — |  |  | 44,058 |  |  | — |  |  | 54,656 |
KBC Facilities |  | 3,454 |  |  | 816 |  |  | 5,744 |  |  | 2,890 |
P2 Vendor Note |  | 293 |  |  | 75 |  |  | 227 |  |  | 181 |
P2 Exhibitor Notes |  | 66 |  |  | — |  |  | 85 |  |  | 22 |
Total non-recourse notes payable |  | 3,813 |  |  | 44,949 |  |  | 6,056 |  |  | 57,749 |
Less: Unamortized debt issuance costs and debt discounts |  | — |  |  | (2,430 | ) |  | — |  |  | (2,701 | )
Total non-recourse notes payable, net of unamortized debt issuance costs and debt discounts |  | $ | 3,813 |  |  | $ | 42,519 |  |  | $ | 6,056 |  |  | $ | 55,048 |
5.5% Convertible Notes Due 2035 |  | $ | 46,771 |  |  | $ | — |  |  | $ | — |  |  | $ | 50,571 |
Second Secured Lien Notes |  | — |  |  | 10,835 |  |  | — |  |  | 9,165 |
Cinedigm Revolving Loans |  | 11,975 |  |  | — |  |  | 19,599 |  |  | — |
2013 Notes |  | — |  |  | 5,000 |  |  | — |  |  | 5,000 |
Total recourse notes payable |  | 58,746 |  |  | 15,835 |  |  | 19,599 |  |  | 64,736 |
Less: Unamortized debt issuance costs and debt discounts |  | — |  |  | (4,165 | ) |  | — |  |  | (5,340 | )
Total recourse notes payable, net of unamortized debt issuance costs and debt discounts |  | $ | 58,746 |  |  | $ | 11,670 |  |  | $ | 19,599 |  |  | $ | 59,396 |
Total notes payable, net of unamortized debt issuance costs |  | $ | 62,559 |  |  | $ | 54,189 |  |  | $ | 25,655 |  |  | $ | 114,444 |
Non-recourse debt is generally defined as debt whereby the lenders’ sole recourse with respect to defaults, is limited to the value of the asset, which is collateral for the debt. Certain of our subsidiaries are liable with respect to, and their assets serve as collateral for, certain indebtedness for which our assets and the assets of our other subsidiaries that are not parties to the transaction are generally not liable. We have referred to this indebtedness as "non-recourse debt" because the recourse of the lenders is limited to the assets of specific subsidiaries. Such indebtedness includes the Prospect Loan, the KBC Facilities, the 2013 Term Loans, the P2 Vendor Note and the P2 Exhibitor Notes. Prospect Loan In February 2013, our DC Holdings, AccessDM and Phase 2 DC subsidiaries entered into a term loan agreement (the “Prospect Loan”) with Prospect Capital Corporation (“Prospect”), pursuant to which DC Holdings borrowed $70.0 million. The Prospect Loan bears interest at LIBOR plus 9.0% (with a 2.0% LIBOR floor), which is payable in cash, and at an additional 2.50% to be accrued as an increase to the aggregate principal amount of the Prospect Loan until the 2013 Credit Agreement is paid off, at which time all accrued interest will be payable in cash. Collections of DC Holdings accounts receivable are deposited into accounts designated to pay certain operating expenses, principal, interest, fees, costs and expenses relating to the Prospect Loan. On a quarterly basis, if there is excess cash flow, it is used for prepayment of the Prospect Loan. We also maintain a debt service fund under the Prospect Loan for future principal and interest payments. As of September 30, 2017 and March 31, 2017, the debt service fund had a balance of $1.0 million, which is classified as part of restricted cash on our condensed consolidated balance sheets. The Prospect Loan matures on March 31, 2021 and may be accelerated upon a change in control (as defined in the agreement) or other events of default as set forth therein and would be subject to mandatory acceleration upon insolvency of DC Holdings. We are permitted to pay the full outstanding balance of the Prospect Loan at any time after the second anniversary of the initial borrowing, subject to the following prepayment penalties:
• | 5.0% of the principal amount prepaid between the second and third anniversaries of issuance;
• | 4.0% of the principal amount prepaid between the third and fourth anniversaries of issuance;
• | 3.0% of the principal amount prepaid between the fourth and fifth anniversaries of issuance;
• | 2.0% of the principal amount prepaid between the fifth and sixth anniversary of issuance;
• | 1.0% of the principal amount prepaid between the sixth and seventh anniversaries of issuance; and
• | No penalty if the balance of the Prospect Loan, including accrued interest, is prepaid thereafter.
The Prospect Loan is primarily secured by a first priority pledge of the stock of DC Holdings, our wholly owned subsidiary, the stock of AccessDM, which is wholly owned by DC Holdings, the stock of Access Digital Cinema Phase II, Corp., our wholly owned subsidiary, and the stock of our Phase I DC subsidiaries, which are subsidiaries of AccessDM. The Prospect Loan is also guaranteed by each of those subsidiaries. The Prospect Loan contains customary representations, warranties, affirmative covenants, negative covenants and events of default. The following table summarizes the activity related to the Prospect Loan:
(In thousands) |  | September 30, 2017 |  | March 31, 2017
Prospect Loan, at issuance |  | $ | 70,000 |  |  | $ | 70,000 |
PIK Interest |  | 4,778 |  |  | 4,778 |
Payments to date |  | (30,720 | ) |  | (20,122 | )
Prospect Loan, net |  | 44,058 |  |  | 54,656 |
Less current portion |  | — |  |  | — |
Total long term portion |  | $ | 44,058 |  |  | $ | 54,656 |
KBC Facilities In December 2008, we began entering into multiple credit facilities to fund the purchase of Systems to be installed in movie theatres as part of our Phase II Deployment. There were no borrowings under the KBC Facilities during the six months ended September 30, 2017. The following table presents a summary of the KBC Facilities (dollar amounts in thousands):
|  |  |  |  |  |  |  | Outstanding Principal Balance
Facility 1 |  | Credit Facility |  | Interest Rate 2 |  | Maturity Date |  | September 30, 2017 |  | March 31, 2017
1 |  |  | $ | 22,336 |  |  | 3.75 | % |  | September 2018 |  | $ | 671 |  |  | $ | 3,758 |
3 |  |  | 11,425 |  |  | 3.75 | % |  | March 2019 |  | 2,448 |  |  | 3,264 |
4 |  |  | 6,450 |  |  | 3.75 | % |  | December 2018 |  | 1,151 |  |  | 1,612 |
|  | $ | 40,211 |  |  |  |  |  |  | $ | 4,270 |  |  | $ | 8,634 |
1. | For each facility, principal is to be repaid in twenty-eight quarterly installments.
2. | Each of the facilities bears interest at the three-month LIBOR rate, which was 1.00% at September 30, 2017, plus the interest rate noted above.
5.5% Convertible Notes Due April 2035 On April 29, 2015, we issued $64.0 million aggregate principal amount of unsecured senior convertible notes payable (the "Convertible Notes") that bear interest at a rate of 5.5% per year, payable semiannually. The Convertible Notes mature on April 15, 2035, unless earlier repurchased, redeemed or converted and are convertible at the option of the holders at any time until the close of business on the business day immediately preceding the maturity date. Upon conversion, we will deliver to holders in respect of each $1,000 principal amount of Convertible Notes being converted a number of shares of our Class A Common Stock equal to the conversion rate, together with a cash payment in lieu of delivering any fractional share of Class A Common Stock. The conversion rate applicable to the Convertible Notes on the offering date was 82.4572 shares of Class A Common Stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $12.13 per share of Class A Common Stock), which is subject to adjustment if certain events occur. Holders of the Convertible Notes may require us to repurchase all or a portion of the Convertible Notes on April 20, 2020, April 20, 2025 and April 20, 2030 and upon the occurrence of certain fundamental changes at a repurchase price in cash equal to 100% of the principal amount of the Convertible Notes to be repurchased plus accrued and unpaid interest, if any. The Convertible Notes will be redeemable by us at our option on or after April 20, 2018 upon the satisfaction of a sale price condition with respect to our Class A Common Stock and on or after April 20, 2020 without regard to the sale price condition, in each case, at a redemption price in cash equal to 100% of the principal amount of the notes to be repurchased plus accrued and unpaid interest, if any. The net proceeds from the Convertible Note offering was $60.9 million, after deducting offering expenses. We used $18.6 million of the net proceeds from the offering to repay borrowings under and terminate one of our term loans under our 2013 Credit Agreement, of which $18.2 million was used to pay the remaining principal balance. Concurrently with the closing of the Convertible Notes transaction, we repurchased approximately 272,100 shares of our Class A common stock from certain purchasers of Convertible Notes in privately negotiated transactions for $2.7 million. In addition, $11.4 million of the net proceeds was used to fund the cost of repurchasing approximately 1,179,138 shares of our Class A common stock pursuant to the forward stock purchase agreement described in Note 6 - Stockholders' Deficit. We recorded interest expense of $0.7 million and $0.9 million for the three months ended September 30, 2017 and 2016, respectively, and $1.4 million and $1.8 million for the six months ended September 30, 2017 and 2016, respectively, related to the Convertible Notes. On July 10, 2017, we entered into exchange agreements (the “Exchange Agreements”) with holders of Convertible Notes representing approximately 99% of the principal amount, pursuant to which $3.8 million of the Convertible Notes were surrendered by such holders in exchange for 1,315,326 shares of Class A Common Stock and $1.5 million in second lien notes under the Loan Agreement during the three months ended September 30, 2017. As a result of the exchanges, we recorded a debt conversion expenses of $3.1 million and a loss on extinguishment of notes payable of $0.1 million. As a result of the exchange transaction on November 1, 2017, this debt has been classified as current as of September 30, 2017. See Note 10 “Subsequent Events” for further discussion. Second Secured Lien Notes On July 14, 2016, we entered into a Second Lien Loan Agreement (the “Loan Agreement”), under which we may borrow up to $15.0 million, subject to certain limitations imposed on us regarding the number of shares that we may issue in connection with the loans. During the six months ended September 30, 2017, we borrowed an aggregate principal amount of $1.5 million under the Loan Agreement (the "Second Secured Lien Notes"), and have borrowed $10.5 million in total under the Loan Agreement. The Second Secured Lien Notes mature on June 30, 2019 and bear interest at 12.75%, payable 7.5% in cash and 5.25% in cash or in kind at our option. In addition, under the terms of the Loan Agreement, we are required to issue 98,000 shares of our Class A common stock for every $1 million borrowed, subject to prorata adjustments. The Loans may be prepaid without premium or penalty and contain customary covenants, representations and warranties. The obligations under the Loans are guaranteed by certain of our existing and future subsidiaries. We have pledged substantially all of our assets, except those assets related to our digital cinema deployment business, to secure payment on the Second Secured Lien Notes. The Loan Agreement was amended on August 4, 2016, on October 7, 2016, and on March 31, 2017 to facilitate subsequent borrowing transactions and clarify certain terms of the shares issuable in connection with the loans. Cinedigm Credit Agreement On October 17, 2013, we entered into a credit agreement (the “Cinedigm Credit Agreement”) with Société Générale. Under the Cinedigm Credit Agreement, as amended in February 2015 and April 2015, we were permitted to borrow an aggregate principal amount of up to $55.0 million, including term loans of $25.0 million (the “Cinedigm Term Loans”) and revolving loans of up to $30.0 million (the “Cinedigm Revolving Loans”). Interest under the Cinedigm Term Loans was charged at a base rate plus 5.0%, or the Eurodollar rate plus 6.0% until the Cinedigm Term Loan was repaid on April 29, 2015 in connection with the Convertible Notes offering. The Cinedigm Revolving Loans bear interest at a base rate of 6.25% or the Eurodollar rate of 1.0% plus 4.0%. The Base rate, per annum, is equal to the highest of (a) the rate quoted by the Wall Street Journal as the “base rate on corporate loans by at least 75% of the nation’s largest banks,” (b) 0.50% plus the federal funds rate, and (c) the Eurodollar rate plus 4.0%. We repaid the entire outstanding balance of the Cinedigm Term Loans and amended the terms of the Cinedigm Revolving Loans in connection with our issuance of the Convertible Notes. In connection with the repayment of the Cinedigm Term Loans, we wrote-off certain unamortized debt issuance costs and the discount that remained on the balance of the note payable. As a result, we recorded $0.9 million as a loss on extinguishment of debt for the year ended March 31, 2016. An April 2015 amendment to the Cinedigm Revolving Loans extended the term of the Cinedigm Credit Agreement to March 31, 2018, provided for the release of the equity interests in the subsidiaries that we had previously pledged as collateral, changed the interest rate and replaced all financial covenants with a single debt service coverage ratio test commencing at June 30, 2016 and a $5.0 million minimum liquidity covenant. The Cinedigm Revolving Loans, as amended, bear interest at Base Rate (as defined in the amendment) plus 3% or LIBOR plus 4%, at our election, but in no event may the elected Base Rate or LIBOR rate be less than 1%. We are permitted to repay the Cinedigm Revolving Loans, at our option, in whole or in part. In May 2016, we entered into an agreement with Société Générale (as Administrative Agent), which amended certain terms of the Cinedigm Credit Agreement (the “May 2016 Amendment”) primarily to increase the Company’s cash available for operations. The May 2016 Amendment also reduced the maximum principal amount available under the Cinedigm Credit Agreement from $30.0 million to $22.0 million. In July 2016, we entered into an amendment to the Cinedigm Credit Agreement, which, among other things, lowered the minimum liquidity requirement to $0.8 million up to June 30, 2017 and all times after at least $5.0 million in minimum liquidity. On August 10, 2017, we received a waiver to keep the minimum liquidity at $0.8 million through October 13, 2017 and at all times after October 13, 2017, we must maintain at least $5.0 million minimum liquidity. On November 9, 2017, we entered into an amendment to maintain the minimum liquidity at $0.8 million until the maturity date of the Revolving Maturity date. This amendment also reduced the revolving aggregate maximum credit amount by $2.0 million on each of January 31, 2018 and February 28, 2018 if the outstanding obligations are not repaid in full by such date. In addition, certain of our subsidiaries that are guarantors to the Cinedigm Credit Agreement entered into a Guaranty Supplement, pursuant to which certain of the subsidiaries guaranteed the Company’s obligations under the Cinedigm Credit Agreement and the subsidiaries pledged substantially all of their assets to secure such obligations. In addition, pursuant to the July 2016 amendment, (i) the Eurodollar rate loans were changed to Base plus 4.5% and base plus 3.5% for Base rate loans, (ii) the requirement for the debt service reserve account was eliminated, and (iii) the maximum principal amount available to borrow was reduced from $22.0 million to $17.1 million. As of September 30, 2017, no additional borrowings were available under the Cinedigm Revolving Loans. In connection with the Cinedigm Revolving Loans, we maintained a debt service reserve account in restricted cash for certain scheduled interest and principal payments due on the Cinedigm Revolving Loans and Convertible Notes as of March 31, 2016 of $2.2 million. As a result of the July 2016 amendment to the Cinedigm Credit Agreement, no such reserve amount was required to be maintained as of March 31, 2017. On November 9, 2017, we obtained a waiver on a covenant under the Cinedigm Credit Agreement and Second Secured Lien Notes for the quarter ended September 30, 2017 and each fiscal quarter thereafter. 2013 Notes In October 2013, we entered into securities purchase agreements with certain investors, pursuant to which we sold notes in the aggregate principal amount of $5.0 million (the “2013 Notes”) and warrants to purchase an aggregate of 150,000 shares of Class A Common Stock (the “2013 Warrants”) to such investors. We allocated a fair value of $1.6 million to the 2013 Warrants, which was recorded as a discount to the 2013 Notes and is being amortized through the maturity of the 2013 Notes as interest expense. The principal amount outstanding under the 2013 Notes is due on October 21, 2018. The 2013 Notes bear interest at 9.0% per annum, payable in quarterly installments over the term of the 2013 Notes. The 2013 Notes may be redeemed at any time, subject to certain premiums. Zvi Rhine, a member of our Board of Directors and a related party, is a holder of $0.5 million of the 2013 Notes as of September 30, 2017 and March 31, 2017.

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